boozco enterprise opportunity mena telecom operators

8/3/2019 BoozCo Enterprise Opportunity MENA Telecom Operators

1/16

Cashing In on BusinessThe Enterprise

Opportunity for MENATelecom Operators

Bahjat El-Darwiche

Hadi Raad

Jad Hajj

Huy Nguyen-Tuong

Perspective


2/16

Contact Information

Beirut

Bahjat El-DarwichePartner

+961-1-985-655

[email protected]

Hadi Raad

Principal

+961-1-985-655

[email protected]

Dubai

Jad Hajj

Senior Associate

+971-4-390-0260

[email protected]

Hu Nguen-Tuong

Associate

+971-4-390-0260

[email protected]

Booz & Company


3/16

Booz & Company

EXECUTIVESUMMARY

Competition will be intense; business

communication equipment vendors, ICT

service providers and system integrators,

and software and online companies all

will seek to grab a share of the MENA

regions fast-growing enterprise ICT

opportunity. Telecom operators, how-

ever, have several distinct advantages.

They already have established customer

relationships, large-scale project man-

agement experience, multi-platform net-work infrastructure, and reach. Telecom

operators also have strong brands and

access to capital.

Despite those advantages, MENA opera-

tors will not automatically win enter-

prise customers. Operators will need to

change their service delivery approach

and create a new value proposition.

They will need to refocus efforts to

capture the opportunity presented by

the creation of millions of new small

and medium-sized enterprises (SMEs)

over the next several years. They need

to expand their offering to lock in

key accounts among large enterprises

and leverage their incumbent position

with government agencies to capture

large-scale digitization opportunities.Operators also should benet from co

verging consumer and enterprise offer-

ings, leveraging consumer relationship

to win enterprise business, and gaining

new customers from business clients.

If successful, regional MENA opera-

tors will tap into a growth area, fueling

substantial gains for years to come.

The enterprise, or business, segment presents MENA telecom

operators with a large potential growth opportunity. In other parts

of the worldsuch as Europeenterprises account for an averageof 17 percent of telecom operators revenues. Although the busines

segment has yet to contribute that much for operators in the MEN

region, the regional enterprise ICT market is sizable, and growing

at such a rapid clip that it should come close to doubling within v

years. The number of enterprises in the MENA region will increas

and so will their spending on ICT, until it approaches that of their

peers in Europe and the U.S. The spending increase is driven by a

sea change in mobility and cloud computing needs, as well as the

desire for unied and collaborative services such as enterprise socia

media, as smart phones and tablet PCs have gained popularity.


4/16

2 Booz & Company

kEy HIGHLIGHTS

The number of enterprises in

the MENA region will grow at a

10 percent annual rate through

2014creating almost 4 million

new businesses.

Enterprise revenue accounts

for an average of 17 percent of

revenue among major European

telecom operators; for some, it

is as high as 25 percent. This

suggests upside potential for

MENA operators.

Enterprise customers are

increasingly sophisticated in

theirneeds,specicintheir

requirements, and quick in

embracing new communicationdevices.

Mobile and converged

communications, as well social

media and cloud computing, are

driving enterprise ICT demand.

Operators can leverage their

strengths to grab share in the

rapidly growing SME segment,

lock in key large accounts and

large-scale digitization projects,

andbenetfromconverging

consumer and enterprise

offerings.

The enterprise segment encompasses

a range of businesses, from those

as small as one employee working

at home to large enterprises or

government agencies with more than

250 employees. Across the globe,

telecom operators increasingly rely on

this segment to provide new avenues

of growth, especially in markets

where consumer growth has reachedor is approaching saturation. Major

telecom operators in Europe, for

example, are already reaping benets

from the enterprise segment, deriving

as much as a quarter of total revenue

from this business (see Exhibit 1).

As many MENA consumer telecom

markets approach saturation, MENA

operators hope to continue growingby putting new emphasis on their

efforts in the enterprise segment.

The ICT segment for enterprises in

the MENA region is signicantly

underserved: Although enterprises

account for as much as 6.5 percent

of all mobile SIMs in some European

countries, they have not even reached

1 percent in any country in the

MENA region. Furthermore, the

MENA enterprise ICT market is

growing rapidly. It will almost double

within ve years, from an estimated

$14.8 billion market in 2010 to $26.1

billion in 2015.

ENTERPRISECUSTOMERS:A GROWINGOPPORTUNITY

1 2007 (TeliaSonera stopped reporting a separate integrated enterprise services division at the end of 2007).

Source: Reuters; Booz & Company analysis

Exhibit 1The Enterprise Segment Contributes Substantial Amounts of Revenue for Many

European Operators

Enterprise

Consumer

ENTERPRISE VS. CONSUMER REVENUES, 2010(IN US$ MILLIONS)

Swisscom

Orange

Telstra

100%

$11,988

$25,633

$14,2681

TeliaSonera

Average 17%

3,033(25%)

8,955(75%)

$45,50338,287(84%)

7,216(16%)

21,283(83%)

4,350(17%)

12,241(86%)

2,028(14%)


5/16

Booz & Company

Increases in both the number of

enterprises and the expected ICT

spend per enterprise will drive that

rapid growth. Booz & Company

estimates that the number of

enterprises in the MENA region will

grow at a 10 percent annual rate

through 2014: this will add almost 4million new businesses to the current

base of 8.25 million. That growth

substantially outpaces the growth

rate of businesses in both Europe

and North America. This robust

increase in the number of enterprises

presents MENA telecom operators

with a prime growth opportunity.

Nevertheless, ICT spending of

enterprises in the MENA region is less

than one-fth the amount businesses

in western Europe spend, and only

one-tenth the amount those in theU.S. spendanother strong sign

of growth potential in the MENA

enterprise ICT market.

Four trends are converging to

drive the enterprise ICT demand.

Businesses increasingly are relying on

both mobile communications devices

and applications to enhance efciency

and productivity: Because senior

management is now more involved

in decision making about mobile

technology, rather than leaving it

all to IT departments, companies

are increasingly adopting innovative

mobile business applications.

According to AT&T, 40 percent of

sales of the iPhone, once considereda consumer device, are to businesses.1

This is a marked difference from the

not-too-distant-past when businesses

tended to be much slower than

consumers in adopting technologies.

Second, communications are

converging, as businesses more

and more are seeking seamless

integration of xed and mobile

devices to improve productivity and

collaboration. Third, enterprises

are rapidly deploying Web-based

technologiessuch as social mediathat to date have mainly been used by

consumers. Finally, cloud computing

presents an opportunity for business

to foster collaboration and mobility

and curb costs (see What Businesses

Need Now, page 4).

The needs within businesses are

not the only force driving the

enterprise opportunity. Broadband

penetration rates are rising across

the region and so is consumer ICT

sophistication. Governments are

spending heavily on state-of-the-

art mega-developments. Those

factors combined have spawned

increases in digitization across

industries, such as smart meteringfor utilities, intelligent systems

for transportation, and electronic

records for healthtransforming

traditional economic sectors and

thus increasing spend by enterprise

on ICT services.

According to a survey by the

Economist Intelligence Unit, almos

50 percent of all global enterprises

expect to spend more on telecom

services in 2011 and 2012 than the

spent previously.2 Telecom operatowill likely face stiff competition to

capture the expected enterprise IC

boom. Business communication

equipment vendors, ICT service

providers and system integrators,

and software and online companie

all are eager to compete in this

untapped market.

The MENA enterprise ICT market will

almost double within fve years, driven

by growth in the number of businesses

and ICT spending per enterprise.


6/16

4 Booz & Company

What Businesses Need Now

Enterprise ICT demand is driven by the need for increased mobility,

converged communications, collaboration, and cloud computing.

Mobilit

The need for enhanced productivity, coupled with the greater use of

personal devices within enterprises, is fueling the integration of mobile

services and applications with business requirements. Smartphones and

tablets,suchasApplesiPad,areoodingtheenterprisemarket.According

to one survey, 12 percent of companies have deployed iPads or tablets, and

an additional 36 percent are considering doing so.3

As a result, innovative ways of using devices for business are emerging.

Some restaurants, for example, are replacing menus with interactive iPad

devices and applications. Machine-to-machine (M2M) applications are likely

to provide major growth opportunities, as vehicles, industrial machinery,

and plants will more and more frequently be equipped with sensors and

wireless chips needed to communicate. With 4G mobile networks, demand

for bandwidth-intensive M2M applications such as in-car entertainment

content and wireless updates for displays, billboards, and media titleswill accelerate. For example, Sprint partners with MediaTile, which offers

digital signage, to offer an end-to-end solution for customers with fast

deployments and low infrastructure costs.

Converged Communications

Enterprises are increasingly seeking seamless integration of communication

functionalityandapplicationsamongvariousxedandmobiledevicesto

improve productivity and collaboration. To address this demand, operators

areofferinguniedcommunicationsplatformsthathandleallmessaging,

voice, video, and data services. These platforms help companies decrease

costs by reducing operational redundancies while providing an increase

in productivity through streamlined processes. Etisalat in the UAE, for

example, recently launched a Public TelePresence room that provides high-denitionvirtualconferencingcapabilities,allowingbusinessgroupstomeet

and collaborate in multiple locations worldwide in real time across a global

video network.

Uniedcommunicationserviceswillgrowtoa$37.3billionbusinessby

2013,$1.6billionaloneintheMENAregion. 4


7/16

Booz & Company

Collaboration

Enterprises are using Web-based technologies that have previously been

used by consumers. For example, businesses are tapping into social

media channels to inspire, educate, entertain, and connect with both their

customers and employees. This lets the businesses gather a range of input

and make better decisions. Of the Fortune 100 companies, 65 percent have

active Twitter accounts, 54 percent have Facebook fan pages, 50 percenthave YouTube video channels, and 33 percent have corporate blogs.5 In a

2010 survey of MENA Twitter users, 90 percent said that Twitter has affected

their perceptions of a brand or company, and 82 percent said they would be

more willing to buy from a brand that has a relationship with them over the

service. An estimated 400 brands are represented on Twitter in the MENA

region, including companies, government departments, NGOs, and non-

protorganizations. 6 In addition to social networks, businesses are tapping

into wikis and blogs. Wikis are websites that allow the creation and editing

of content from multiple users; businesses are using wikis both internally

to share knowledge and externally to communicate with the public. Some

companies, including Lego, turn to blogs to retrieve customer feedback

and enable more-effective design and marketing. Enterprise customers are

seeking end-to-end wikis and social media applications that they can use

in-house; telecom operators can partner with social media players to offer

enterprises end-to-end solutions that satisfy this need.

Cloud Computing

Cloudcomputing,bysomeestimates,isa$113billionglobalbusiness

today.7 Enterprises increasingly will turn to cloud computing as a way to

facilitate collaboration and mobility as well as to help them control their

capital spending. Cloud computing typically involves a pay-as-you-go

model, allowing companies to defer costly up-front payments; it also

enables corporations to better optimize servers deployed in different

locations and different time zones, eliminating the need to purchase

additional capacity in any single location. SMEs also typically lack the skills

to manage their IT needs, making outsourcing to the cloud appealing.

The actual application of cloud computing takes three forms: Infrastructure-

as-a-service (IaaS) mainly provides data storage and processing power

through the operators data center to business customers. Software-as-a-

service (SaaS) gives users access to business applications such as CRM,

workforce management, and collaboration tools, which are hosted at the

data center. Platform-as-a-service (PaaS) provides an online development

environment by offering computing resources and development tools

in the cloud. Amazons Web services and Googles App Engine are

successful examples. Today, operators are well positioned to leverage their

infrastructure to create their own cloud solutions for enterprise customers.


8/16

6 Booz & Company

Telecom operators can capitalize

on six core capabilities to secure a

share of the enterprise opportunity.

1. Multi-platform network infrastruc-

ture. Telecom operators can use their

multi-platform network infrastruc-

ture to deliver services on a variety

of devices. Integrated operators

with carrier-grade xed and mobile

networkscan offer a converged

experience for businesses to use their

applications at the ofce or on the go.

In addition, operators can enable deliv-

ery of third-party services over their

platforms through open application

programming interfaces, allowing users

to expand their range of services.

2. Established customer relation-

ships. Through usage, billing, and

customer care interaction, telecom

operators have access to an estab-lished enterprise customer base. This

gives them a strong lead over any

competitors that need to forge these

relationships from scratch.

3. Wide reach. Telecom operators

use a variety of sales channels and

have a strong presence across the

geography they serve. Operators can

use sales outlets, call centers, and

indirect channels such as resellers or

partnerships with hardware providers

to reach targeted customers much

faster than other players.

TAKINGADVANTAGEOF OPERATORSSTRENGTHS

Operators can use sales outlets, call

centers, and indirect channels to reach

targeted customers much faster than

other players.


9/16

Booz & Company

4. Large-scale program management

experience. Many established telecom

operators have broad experience in man-

aging large-scale infrastructure deploy-ment and service delivery programs with

many stakeholders and interdependen-

cies. These operators can deploy a simi-

lar approach when delivering enterprise

ICT services to large customers.

5. Strong brands. Many telecom

operators enjoy strong brand

recognition, typically in the consumer

market where they have ample

experience. This strong consumer

awareness can translate to thebusiness segment, providing operators

with an advantage over competitors.

6. Access to capital. Particularly

in the MENA region, telecom

operators are cash rich and have

the means to invest in long-term,

capital-intensive projects.

Each of these six core capabilities

provides MENA telecom operators

with an edge over competitors in

approaching the enterprise businesA combination of some or all of

these capabilities adds up to a

potent competitive advantage with

enterprise customers.


10/16

8 Booz & Company

With stiff competition almost certain

to emerge for the enterprise ICT

market, MENA telecom operators

need to consider the business market

in a fundamentally new manner and

adopt differentiated approaches to

succeed in securing and maintaining

clientswhether SMEs, large

enterprises, or government agencies.

Telecom operators will have the

ability not only to gain a footholdin these emerging businesses, but

also solidify ties with individuals

who work in these organizations,

bolstering their consumer business.

Focus on SMEs to Capture Emerging

Opportunity

SMEs represent the largest segment,

in number of businesses, of the

enterprise market. The SME segment

in the MENA region is gaining in

sophistication with an increased need

for mobile and data services. They

want off-the-shelf services that are

cost-effective; they typically do not

have in-house IT capabilities and

thus require services that are easy to

install and use.

To serve the SME segment effectively,

regional telecom operators rst willneed to group customers based on

behavioral characteristics such as

telecom expenditures and service

sophistication. Then they need

to design bundled or converged

communications solutions that

deliver a one-stop-shop experience

for each customer group and cover

the basic needs of voice and data

connectivity, both at the ofce and

on the move. For example, with its

ofce-in-a-box bundle, Q-tel offers

basic data connectivity coupled witha managed IP-telephony solution.

Telecom operators should also adapt

their mobile plans to meet the needs

of this segment: Saudi Telecoms

recently launched Business Flex plan,

for example, is a post-paid plan

that works with pre-paid recharge

vouchers, allowing SMEs to control

their budget by setting a xed credit

amount that employees can consume

on a monthly basis. Telecom operators

should also provide more-sophisticated

SMEs with services that let them

use the latest ICT applications with

minimal up-front investment, such

as software-as-a-service (SaaS)

cloud computing services. To offer

SaaS, telecom operators typically

partner with application providers.

One example is Vodafone, which

collaborated with Decho to develop asuite of cloud-based backup services,

allowing Vodafone SME customers to

back up digital content to a remotely

hosted secure site. Another example

is Swisscom, which is offering the

Google Search Appliance as part of

a complete business e-enablement

solution to SMEs.

Operators typically consider retail

stores the best option for building

their brand and reaching enter-

prises in a cost-effective manner.However, because SMEs are scat-

tered throughout the region and not

clustered in one city, they are hard

to reach through retail outlets. As

a result, operators might consider

using resellers that have the wide-

spread coverage necessary to reach

SMEs. Operators could also target

less-sophisticated SMEs through

outbound telesales, transforming

the call center from the passive role

of taking incoming calls to a more

interactive one.

PREPARING TOCOMPETE IN THEENTERPRISE ICTMARKET


11/16

Booz & Company

Lock In Large Accounts with

Turnkey Solutions

Large enterprises and key accounts

typically have a large number of

employees and will likely spend

signicantly on ICT. These customers

increasingly demand turnkey

solutions that address their specicbusiness needs, such as increasing

productivity, improving customer

satisfaction, and cutting costs. They

typically prioritize service levels over

price. Because large enterprises in the

same industrysuch as healthcare

or nancial serviceshave similar

ICT requirements, telecom operators

would benet from ne-tuning their

segmentation to differentiate large

enterprises and key accounts by

industry. Large enterprises and key

accounts also expect a differentiatedsales and customer service experience

that only dedicated account and

service managers can deliver.

To service large enterprises effec-

tively, regional telecom operators will

need to migrate from being provid-

ers of basic voice and data services

to providing full ICT solutions.

That entails initially expanding their

product portfolio and service offer-

ings to include systems integration,

managed services, and cloud services,

and then customizing those offerings

to deliver complete, targeted ICT

solutions. The portfolio offerings

need to be not only comprehensive

but also specicwith solutions that

address customers business needs

and leverage managed, hosted, andM2M services. In targeting large

enterprises, telecom operators also

need to shift from a typical account

manager sales approach to a consult-

ing relationship, acting as partners

with the customers and designing

turnkey solutions rather than offering

off-the-shelf services.

Some global telecom operators have

relied on acquisitions to solidify

their position with large enterprises.

BT Global Services, for example,has been active in the past few

years making selected acquisitions

of specialized ICT providers. Its

acquisitions revolve around two

main objectives. First, to expand

its geographic footprint: BT Global

Services bought Frontline, a provider

of end-to-end IT services within the

Asia-Pacic region, to bolster its

presence there. Similarly, BT acquired

Integrated Network Solutions in

Belgium, strengthening its business

in Belgium, the Netherlands,

and Luxembourg. Second, BT

Global Services is expanding its

service portfolio. Its acquisition

of Stemmera provider of unied

communications, IP telephony,

network integration, and data cente

servicespositioned the companyto offer networked IT services. BT

Global Servicess buyout of Net2S

Group, a technology consultancy

specializing in capital markets,

enhanced its ability to provide ICT

services to businesses in the nancia

services industry.

Leverage Government Relationships

to Capture Digitization Opportuniti

Beyond the traditional enterprise

market opportunity, regional

incumbent telecom operators shoualso seek to position themselves

as enablers for digital economies

by leveraging their privileged

government relationships and

becoming the provider of choice fo

government ICT requirements.

Applications such as smart metering

for utilities, intelligent systems for

transportation, and electronic recor

for health are driving transformatio

in traditional economic sectors. In


12/16

10 Booz & Company

addition, the economic zones that

several governments are developing

throughout the MENA region are

an ideal platform for collaboration

between telecom operators and

government entities to enable smart

cities and digital neighborhoods.

To capture large-scale projects,

telecom operators need to build a

deep knowledge of the economic

sector they would be serving.

Whether it is for utilities, education,

transportation, or healthcare, telecom

operators need to understand the

challenges government entities and

businesses in these sectors are facing

and propose ICT solutions to address

their specic needs. To deliver these

services, operators will need to have

strong solution design, systems

integration capabilities, and large-

scale operations.

Operators in other markets

are already using partnershipsand acquisitions to build these

capabilities. For example, T-Systems

acquired AirIT International GmbH,

a provider of airport IT services, to

serve the transportation sector. It

also bought Metrolico, a provider

of IT infrastructure management, to

benet from its leadership position

in the Spanish nancial sector. At the

same time, T-Systems has developed

an extensive network of alliances

with prominent global vendors,

including Microsoft, Cisco, Intel, and

SAP, allowing it to develop software

technology jointly and launch

wireless LAN and SAP application

management services.

Use Enterprise Relationships to

Bolster Consumer Offerings

Telecom operators can ride the

popularity of some end-user devices

(such as iPads or BlackBerrys) and

the adoption of services by key

decision makers in the enterprise to

promote their business applications.

For instance, they can provide

and promote mobile- or tablet-


13/16

Booz & Company

based applications to monitor sales

performance. Similarly, operators

have a prime opportunity to grow

their consumer base through their

enterprise business by offering and

marketing products directly to the

employees of these businesses. For

example, operators can offer dedicatedbroadband or mobile services to

employees of large companies or

end-to-end services to all customers

of gated communities and real-estate

developments. A convergence of

consumer and enterprise offerings can

enable an operator to cross-market

products and services, sparking growth

throughout its operations.

Get the Service Right

Regardless of the targeted niche within

the enterprise segment, operators

need to differentiate their value

proposition. One way to do so is to

realign their service delivery approach.

For medium-sized businesses, this

might mean access to around-the-clockcustomer service and a help desk with

knowledgeable technical support,

proactive maintenance, and short

resolution times. Telecom operators

will have to transition from having a

traditional customer support model to

an always-reachable, fully equipped

customer relationship center accessible

in person, by phone, or online. Larger

enterprise customers will require

committed service-level agreements

(SLAs) for a comprehensive range

of mission-critical services. Such

agreements would cover problem

management, including fault respons

times and time to repair; they would

also include service delivery, suchas activation and installation times,

as well as performance, including

availability, packet loss, and jitter.

For example, service-level agreement

might specify that IP-VPN availabilit

must range between 99.6 percent and

100 percent, whereas business DSL

availability must range between 99

percent and 99.99 percent.

Telecom operators can ride the

popularity of devices such as iPads and

BlackBerrys to promote their businessapplications.


14/16

12 Booz & Company

The number of enterprises in the

MENA region is increasing at a rapid

pace, and there is considerable oppor-

tunity in the amount these businesseswill spend on ICT. The strong growth

potential will likely bring in many

competitors eager to grab a share of

the large and expanding market.

Telecom operators are ahead of

the curve and remain positioned to

capture a large share of this market.

They have, for example, network

infrastructure, customer relation-

ships, and trusted brands. To achieve

further and sustainable growth from

enterprises, operators need to act

now and aim efforts at this market

segment. They need to segment

within each of the large enterprises,

key accounts, and SMEs markets

and deliver a differentiated raft

of services to each segment. They

also need to extend their portfolio

beyond core connectivity services toinclude tailor-made solutions that

address the specic needs of their

targeted customers. Strategic acquisi-

tions of providers with geographic

or industry expertise is an effective

way for operators to gain ground in

this business and further penetrate

the ICT market. Forming partner-

ships and alliances with vendors and

service providers also can be a way

for operators to expand their services

and capabilities. Whichever route

they choose, MENA operators should

move quickly to position themselves

as a key player to capture the large,

fast-growing, and still untapped

MENA enterprise opportunity.

CONCLUSION


15/16

Booz & Company

About the Authors

Bahjat El-Darwiche is a

partner with Booz & Companybased in Beirut. He specializes

in communications, media,

and technology, and has led

engagements in the areas of

telecom-sector liberalization

and growth strategy

development, policymaking

and regulatory management,

business development and

strategic investments, corporate

and business planning, and

privatization and restructuring.

Hadi Raad is a principal with

Booz & Company in the Middle

East. He specializes in strategy,

business development,

marketing,andnancial

planning, and has extensive

experience in entrepreneurship

and innovation, cloud

applications, cross-industry

digitization, new business

models, and convergence in the

communications, media, and

technology industries.

Jad Hajj is a senior associate

with Booz & Company basedin Dubai. He focuses on

communications, media,

and technology and has

global experience in strategic

and business planning,

digitization business models,

marketing and sales planning,

and innovation in product

development.

Hu Nguen-Tuong is an

associate with Booz & Company

based in Dubai. He specializes

in communications, media,

and technology with a focus on

go-to-market and ICT growth

strategies for the business-to-

business segment of telecom

operators.

Endnotes

1 AT&T press release, May 2010.

2BeyondConnectivity,Ernst&Young,2010.Thendingspre-

sented in the report are based on an online survey conducted by

the Economist Intelligence Unit in November 2009.

3 CLSA Equity Broker, February 2011.

4Trends in Unifed Communications, Business Insights, 2009.

5 Pink Elephant, 2010.

6 Spot On, 2010.

7 Technology 2011, the year ahead Its the Year of the Cloud,

Bank of Americas Merrill Lynch Year Ahead predictions, 2011


16/16

boozco enterprise opportunity mena telecom operators

Documents